GO Virginia offers Southwest regional economic developers a hand up

Last month’s news from the King Institute for Regional Economic Studies that Southwest Virginia individuals bring in a shockingly low amount of income from wages and salaries (a little more than half) with government transfer payments (social security, medical programs) making up a rapidly growing piece of the income pie set me thinking. With the tobacco economy gone from the Southwest and the coal economy going (there are fewer than 3,000 coal miners left in the state, down from 11,000), what’s stopping the remaining population from putting their diminishing funds into U-Hauls and moving to greener pastures? What’s there to prevent the region from becoming a ghost town?

At present, the private sector alone cannot be counted on to do the job. It’s a shame, but it’s a fact. The regional workforce, while it has a good work ethic and includes a number of capable, highly trainable former coal miners, is small, decentralized, poorly educated, aging and in bad health. The land is mountainous and one can only build so many supermax prisons. The bottom line is, without outside stimulation, it appears on the surface there is little to prevent the ghost town scenario.

This is not to say there’s no hope. Outside stimulation is coming. The first wave is from, of all places, the Obama administration. Perhaps one might think of it as being rescued at sea by the same ship that put a torpedo into your side. You don’t have to be happy about who’s doing the rescuing, but you don’t turn your back and drown either.

The federal POWER Initiative has already announced its first grant to the Southwest Virginia region, a $275,000 grant by the Department of Commerce’s Economic Development Administration to the Friends of Southwest Virginia in Abingdon, VA for “RESOURCE-FULL: A Consortium Approach to Workforce and Economic Development in Southwest Virginia.” The Appalachian Regional Commission is also awarding $75,000 to this project. The project will build on the region’s on-going initiatives to develop its tourism and recreation clusters, while also providing training for entrepreneurship and emerging in-demand occupations.

Still, tourism and recreation jobs are not direct replacements for mining jobs. The Bureau of Labor Statistics reported this month (see page 26) that a service industry job receives total compensation of $17.53 per hour including wages and benefits, while a mining job’s compensation is roughly twice that, at $34.35. Mining industry estimates make that total even higher, around $39.42 in wages alone.

A more promising avenue for economic development in Southwest Virginia is the Growth Opportunities Virginia program, better known as GO Virginia. The $38+ million program is a commonwealth-wide public-private partnership with the authority to issue grants to regional economic development organizations and partnerships. It’s creation sailed through the Virginia General Assembly this year, with only token opposition from ideological conservatives who see it as a government intrusion into the natural selection process of the private sector.

Mike Quillen, the former Alpha Natural Resources CEO has been a strong proponent of GO Virginia. He said he initially had concerns that regional organizations in Northeastern Virginia would have the best chance at winning the grants, but that under the GO Virginia plan, each project will have equal footing in terms of making applications. “I think the advantage we have in Southwest Virginia is these funds do require matching funds and we have resources to do that,” Quillen said.

Southwest Virginia’s economic developers know their needs and opportunities better than anyone else, Quillen said. Giving them the opportunity to apply for grants from an organization with a majority of its management and guidance coming from the private sector gives the region the best chance to succeed in replacing mining jobs well.

“The average coal mining wage – and I’m not talking about a supervisor, I’m talking about the average coal miner’s wage – is $82,000 in Virginia over the last couple of years,” Quillen said. “We recognize that it’s going to be very difficult to come up with that. In fact, we’re probably not going to. But what we hope we can find is jobs in the $40-50,000 range. When we look at retail and tourism, if you don’t have the base $40,000+ wage, it’s hard for the other entities to survive. When you lose the $80,000 coal miner job, then Wal-Mart and everybody else suffers because those guys spend that disposable income.”

While several Virginia regions work to replace defense industry jobs with other high-paying positions Quillen referred to as “Microsoft-type jobs,” Southwest Virginia has a target that can attract GO Virginia grants without having to compete directly with them. “We have to look for businesses that need strong work ethic, a talented workforce, somewhat of a rural environment where they could get 100-300 acres to locate where they don’t have neighbors they’re going to get irritated with, and well-priced energy costs.”

And, Quillen added, it’s not quite right to say there’s nothing to prevent the ghost town scenario. There are four-lane highways through the mountains, existing spec buildings and pad-ready sites, plus, “Probably a lot of people don’t recognize what we have done with both the sewer and water, broadband, wireless that we’ve done throughout the Southwest Virginia region in the last 10 years.”

Will that be enough to bring 100-300 job companies with $40,000+ salaries into communities where miners once made $80,000? Even if you’re a Hokie fan, the time has come to root, “GO Virginia.”